Costs of Buying a property – the obvious and the hidden that first home buyers need to know.
Are you thinking of buying a house and becoming a homeowner?
Then make sure you do your sums and budget for all the costs that come with owning or upgrading a property. These include some obvious expenses - like legal and solicitors fees, as well as costs that may not be on your radar.
Not everyone thinks about the need to hire a removalist when you move in, or the need for building and pest inspections, strata searches or having your internet connected. They all need to be in your budget.
The key is to avoid any surprises and do your research upfront. Read this article, so you have an idea of all the steps to buying a house, and approximately how much to budget for it all.
Here are all the upfront fees and hidden costs that come with buying a house, plus a budgeting spreadsheet to help you calculate them.
If you've saved an adequate deposit and you're ready to buy a home, you may think you've calculated all your costs. But the deposit is only one of your upfront costs. From government charges to lender fees, insurance to inspections, there are many extra costs associated with buying a house.
Property buying cost estimates
Here's a simple breakdown of what buying a property could cost you. Keep in mind that this is just an estimate.
Stamp duty: $10,000
Mortgage registration fee: $150
Transfer fee: $300
Loan application fees: $600
Legal fees: $330
Lenders mortgage insurance: $4,000
Other buying costs
Solicitor and conveyancing: $1,000
Strata search: $0
Home and contents insurance: $580
Pest inspection: $200
Moving costs: $700
Building/council inspection: $0
Connecting utilities: $50
Land tax/council rates: $25
Total property buying cost estimate = $17,935
What are the upfront fees and costs of buying a house?
Stamp duty varies from state to state, and most states offer exemptions and concessions for first home buyers.
Stamp duty can cost tens of thousands of dollars; the exact amount depends on the value of the property and the state in which you buy it.
The more expensive the home, the more you’ll pay, with a $1 million purchase attracting stamp duty as high as $55,000.
Fortunately, most states offer stamp duty exemptions and concessions to first-home buyers.
On a $500,000 house, first home buyers won’t pay any stamp duty in Victoria, New South Wales, Northern Territory or Queensland.
Meanwhile, buyers who have previously purchased a home can expect to pay between $8750 (Queensland) and $23,929 (Northern Territory) on the house valued at that price.
Title transfer fees.
This fee also varies from state to state, but usually runs between $100 and $140.
This fee registers your property as the physical security for your home loan. It typically costs between $115 and $140, though in some states it can be close to $200.
Fees and other upfront costs
Lenders also have their fees, which might include application, legal and settlement fees. Mortgage fees can cost several hundred dollars, so make sure you check the fees when you're comparing mortgages. If you plan to borrow more than 80% of the property’s value, you’ll also have to pay for lenders mortgage insurance (LMI) which can add thousands to your total cost.
Without a deposit of 20% or more, most lenders will require you to pay lenders mortgage insurance.
This fee is calculated on a sliding scale: the smaller your deposit, the more insurance you’ll pay. On a $500,000 home with a 10% deposit ($50,000), you’ll be asked to pay insurance of around $8000.
It may seem like a lot, but it allows buyers to purchase a home with as little as 5% of the purchase price as a deposit, helping them to get a foot on the property ladder sooner rather than later.
When you take out a home loan, you don’t simply pay back what you borrow – you also have to pay to set up the loan in the first place.
The application fees are generally around $500-600, though they can be more than $1000, depending on the loan and lender.
It’s worth noting, however, that some lenders will waive this fee under certain circumstances, so it’s worth asking.
Estimated costs: At least $500-600
Mortgage registration & transfer fees
There is also a range of expenses associated with financing your mortgage by your bank or lender. These include a one-off loan establishment or loan application fee, a valuation fee that your lender will carry out.
Some loans may also require you to take out Lenders mortgage insurance (LMI), though these are normally tied to ‘low doc’ loans, which require small deposits. If you are required to pay a deposit to secure the property, as you are for most auctions, this is normally payable soon after this ends.
Loan establishment: $600+
Valuation fee: $300+
Lenders mortgage insurance (LMI): $1500+
Deposit: 5% - 10%
You’ll need to pay for the privilege of formally registering your mortgage. And, as the new owner, the cost of transferring the property into your ownership will fall to you, too.
Mortgage registration fees vary from state to state, from $116.80 in Victoria to $187 in Queensland.
Transfer fees, on the other hand, are generally more expensive, ranging from a flat fee of $141.60 in New South Wales to thousands of dollars in South Australia, Victoria, and Queensland.
Estimated costs: $116.80 in Victoria – $187 in Queensland
Before signing a contract for a home, it's wise to have building and pest inspections carried out. This will ensure the home you're buying is structurally sound and free from damaging pests. These inspections typically cost around $300-400.
If you are thinking of passing on a building or pest inspection seriously reconsider. There could be all sorts of horrors lurking behind that fresh coat of paint. Like what? A termite infestation for one, or some shoddy building work, or rising damp. Get the idea?
A professional building inspector has the experience and equipment to give a property a thorough once over - so make use of their expertise. Just bear in mind that if you are buying at auction - where you may not secure a property - you will be out of pocket for any building inspections you have commissioned.
Building and pest inspection cost: A building inspector could charge anywhere from $300 to $700 depending on the size of the home.
Having the property checked for pest, and other damage can be one of the hidden costs of buying a house. These checks are particularly important for older homes.
Home and contents insurance.
Before your lender unconditionally approves your home loan, you'll need building insurance. It's also a good idea to ensure the contents in your new home. Make sure you compare home and contents insurance policies to get a better deal.
While you have the option of having building insurance separate from contents insurance, many homeowners decide to bundle them together as it can be more cost-effective. This can be costly, however, if there is an issue where your property is broken into, or a fire or flood occurs then many policies will cover you for replacements with the cost of a predetermined excess.
Hidden costs of buying a home, such as insurances, can be crucially expensive. Every home buyer has a choice as to which, if any, insurance they decide to take out for their property and themselves.
Often these will be taken out after settlement. However, you are likely to need to have the funds to obtain them and continue the repayments. Effectively, insurance will cover you and your loved ones in case the worst happens. Not every property owner will want all of the available insurances. However, it does pay to know your options.
Potential insurance policies to consider include:
- Mortgage insurance (also often called mortgage protection)
Not to be confused with LMI, mortgage insurance covers your repayments in the event of sickness or some other adverse event that causes hardship. Be sure to understand exactly what situations mortgage insurance covers you for and the process around claiming this policy.
- Life insurance: In the event of your death, it’s worth considering life insurance if you will leave behind family, particularly if your home is also their home. This will ensure that they remain able to pay back the mortgage if you do pass away.
- Income protection: If you are made redundant or are unable to work due to illness or injury several covers can assist with a certain level of income. While you may not want to cover your entire income amount, and perhaps cover the bare minimum you could live on, it’s worth knowing what you would be covered for with this insurance.
- Landlord’s insurance: Investors may want to consider this extra insurance if they are renting out their property. This will assist with any issues relating to tenants, such as arrears or malicious damage.
Of course, all policies vary so ensure you read the fine print and understand exactly what you are paying for.
Conveyancing & legal fees
Depending on the amount of money you have as a deposit, you may see yourself needing to pay Lender’s Mortgage Insurance or LMI. This cost can be paid upfront, or you do have the option of capitalizing it into the loan. Either way, for those with less than 20% of the property value, LMI is a serious consideration as it can add thousands of dollars to the overall cost. This can be added to your loan value, which is what many people opt for, but remember that you are not insured in this situation, your lender is being insured, so you may be culpable for outstanding fees if you find yourself unable to make your repayments. Some buyers will opt to save for longer to avoid this; however, in a fast-moving market, it may make financial sense to accept the cost and purchase, rather than chasing the growth.
Your financing will also see you charged for other costs. A small amount of stamp duty will likely be payable on the loan amount, and you will also need to pay for mortgage registration costs, and there may be another setup fees. Speak to your broker or lender to get an understanding of what these charges are.
Conveyancing fees, or legal expenses, are likely also to set you back a few hundred dollars unavoidably as they check through and make changes to the contract. This is a crucial part of the process that will ensure you are legally protected and understand your obligations under the signed contract. Speak to a solicitor or conveyancer early to get an understanding of the charges that you will need to pay. Other professionals to consider speaking to that may charge you include accountants and financial planners. If you opt to use these services, ask for quotes in advance and prepare for the costs.
There is a lot of paperwork involved in a property purchase, and to process this most buyer turn to legal professionals - solicitors and conveyancers for help. Qualified conveyancers only deal with property transactions, while solicitors have scope to advise on you on a wider range of legal matters.
In the case where you are considering DIY, the Australian Institute of Conveyancers SA Division (AICSA) advises against doing your conveyancing - unless you are familiar with the process.
So what exactly do they do? Solicitors and conveyancers prepare and lodge all the documents required to complete your property transaction, including the contract of sale and transfer of land document. And most importantly, they conduct searches that can reveal important information about the property - including if there is a legal issue over ownership of the property.
Conveyancers will also hold onto your deposit during the sale, adjust the rates and taxes on the property, and liaise with the banks involved in the final settlement of the property.
Conveyancing fees can range from $1000 to $3,000, depending on the complexity of your sale
While it is possible to complete the legal aspects of buying a property yourself, it’s generally recommended that you engage a conveyancer or solicitor to prepare the documents for you and provide advice.
If you’re purchasing an investment property, chances are you going to want to get a quantity surveyor in there to assess your property and what you can depreciate over the years.
You may be able to depreciate the construction on the building itself or if it’s an older property you can generally only depreciate the interiors known as ‘plant and equipment.’
By getting a quantity surveyor in they can assess everything from the carpet to lamp shades, to the curtains, to the building itself, as also how much you can claim each year and this can be great to help you save money on tax. It is going to cost you somewhere around the $300-$700 marks for a quantity surveyor.
It’s important to know that depreciation does affect the amount of capital gains tax you will pay when it comes time to sell the property. But it most cases it is still well worth claiming.
Working with a Real Estate Agent
If you choose to consult a real estate agent, you’ll have to pay that person’s fee, as well. Not all agents have your best interests at heart — the more you pay for your home, the bigger their fee.
Hiring a real estate agent is not the right choice for everyone, and you should consider your specific circumstances before moving forward.
If you want to minimize your home buying costs as much as possible, and you feel confident in your ability to navigate the real estate market in which you’d like to buy, you may be just fine without an agent.
On the other hand, if you are not well versed in buying real estate and you are feeling a little overwhelmed by the process, it can be well worth it to work with an agent.
The amount you will have to pay toward a real estate agent’s fee can be tough to calculate. In most cases, the home’s seller is on the hook to pay the fee of both his or her agent and the agent of the buyer.
You will still see this fee, although it will likely be absorbed into the listing price of the home. While you won’t be able to avoid the ultimate cost, you can make sure that you get your money’s worth by working with a reputable agent.
Be sure to ask for references, read reviews online and check any relevant credentials of an agent before you hire someone.
So, what are some of the hidden fees you need to consider?
When purchasing a property, you will also want to be aware of any connection fees relating to services and utilities that you will need in the property. While some services do not have an upfront fee, there may be extra costs for facilities you already had in place, such as Wifi if you are required to use a different provider.
Remember that you will also face removalist costs, cleaning costs and the potential for minor renovations and furnishings on the other end of home ownership. While you can delay putting your stamp onto your new home, it’s worth factoring in the eventual cost of painting or altering the home. Some will find that they need to change aspects of the home immediately to allow it to suit their lifestyle.
Buying a house isn’t just about paying what’s on the property’s price tag. There are some extra costs all buyers should be aware of.
So how much are these hidden costs exactly?
Perhaps unsurprisingly, it depends on the value of your property and where it’s located.
Beyond your upfront costs, there are plenty of extra costs you might never have considered until you're in the middle of the home buying journey.
Other extra costs you need to budget for when buying a house include stamp duty. The amount of stamp duty tax you pay depends on the state you live in and is applied to the purchase value of a property. Best to use an online Stamp Duty calculator for a specific quote.
Then there are your ongoing mortgage repayments, utilities, moving costs ($1,000+), council rates and strata fees. You will also want to take out home and contents insurance and mortgage protection insurance ($500+) too.
If the property you move into needs some TLC, you will need to budget for repairs and maybe even renovations, new appliances, and furniture - not to mention ongoing maintenance. Did we mention the internet - you’ll go crazy without WiFi, Netflix, and online shopping.
These hidden costs can add up.
The first range of hidden costs of buying a home that you are likely to face will occur when you start looking to research for your investment property. These costs can be hard to determine, and every home buyer is likely to approach research differently.
However, you now have free access to property insights, local area data and median sales data for every address in Australia.
Buyer’s agent fees may also be a cost to consider. If you do decide to pay for a professional to find and negotiate the sale on your behalf, you will be required to pay for the service. This could amount to several thousands of dollars or even a percentage of the resulting purchase price.
One raft of costs that few buyers will avoid is the pre-purchase inspection costs. This could include any number of reports that you pay for a professional to create, such as valuation, a building inspection, pest inspection or perhaps a strata report. While these can cost upwards of a few hundred dollars to thousands of dollars, they are likely to save you dearly in the long run if they do uncover something unsavory about the home. Remember, you can always take the results back to the vendor and, reasonably, negotiate down the purchase price as a result of your findings.
If you want to access suburb property reports from sources such as CoreLogic RP Data, you may need to pay a fee. Budget $150 per suburb report. If you accessed one property report per month, this would be a monthly cost of $150. If it took you a year to find the right property, your information cost would be $1,800.
These research report helps give you an idea of the value of the property, so it’s going to show you comparable sales, a lot of data and some insight into the suburb that you’re buying in.
There are a bunch of different tools out there, so the cost is going to vary significantly.
This costs $250 per month or cheaper if you sign up for a long period. It allows you to get these reports for basically unlimited amounts of properties. So, you could sign up for a week; you can sign up for a month and get access to as many as you want in that time.
This is probably going to cost you around $200-$500; however, in some circumstances, the lender that you go with may provide a valuation for you free of charge.
The lender is going to need an evaluation to make sure that if you default on your loan the sale of the property will cover the remaining mortgage.
It’s cheaper in very urban areas, places like Sydney and when the market’s moving rapidly because they can do evaluation just from their desk using the Internet. But if you’re out in a rural area, they’ll have to go to the property and inspect the property, so the price of the valuation is going to be more.
Getting an evaluation done is not something that you have a choice in, but how much you pay it may cost you a couple of hundred bucks, or you may get it for free. Check with the mortgage broker as to whether it’s good to go with the lender that offers it for free.
Many first-time buyers are so focused on the ‘important costs’ of buying a property that they forget to put aside money for moving.
When the time comes, you’ll need money for packing supplies and to pay for a moving company or hire a truck.
You can save money by researching a few companies ahead of time and getting multiple quotes.
Cheapest is not always best, so read reviews and ask friends for recommendations.
Unless you have a large vehicle and some very understanding friends, you'll likely have to pay a removalist service to help you move home. Depending upon the size of your move, a removalist can cost anywhere from a few hundred to a few thousand dollars.
Moving IN costs
After you finally get all your belongings into your new home, there’s another set of costs waiting for you. These are the costs you’ll need to pay when setting up your home. These include, but are not limited to:
- Home and contents insurance
- Utility connection for water/electricity/gas/internet
- Council fees
- New appliances
- New furniture
- Cleaning products and hiring a cleaner
- Takeaway/easy meals for your first week
A licensed accountant or financial planner may charge around $200 per hour. If you visited an accountant for three one-hour sessions over a year, this would be $600. To minimise this expense, you could consult a friend or family member who has an accounting or finance background.
You've got to be there on the ground when searching for a property, but this will cost you in petrol, parking, and tolls.
Buyers’ agents’ costs
If you opt to use a buyer’s agent, their service comes at a price, though they can help to find suitable properties for you, negotiate with the seller, and complete background checks on the property.
Buyers' agents have a wide range of industry contacts and can locate the right property for you in a much shorter timeframe - which saves you a lot of legwork. This can be very useful particularly if you are a first-time buyer or are time poor.
Expect them to charge either a fixed fee - based on how much they do for you or a commission calculated as a percentage of the purchase price of the property.
Buyer’s agent cost: Commissions range from 1% to 3% of the purchase price, to anywhere from $1000 to $10,000 for fixed fee service.
It’s not cheap, so when assessing whether or not to get the buyer’s agent they can help you get a property for a better price they can help you find a property that is better suited to you, but they do come at a cost, so you need to know that cost is there and you need to factor that in.
Council and utility rates
After purchasing the property, you’ll need to pay the vendor for council or water rates.
The vendor will have paid any rates owing to the council – generally to the end of the quarter – and they’ll simply add your portion of that amount to the purchase price.
Now you have a better idea of all the hidden costs of buying a house; you can begin putting a budget together and start your house hunting!